-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vxm/CHeJjxEMLHJuVfrMFcNHrIzEY2vHULxG4SMq0Ycb/exBh+LVPCV5EAphhDcK D1CHNRZ5RKfGQ9tgJ7gkeg== 0000950134-02-008780.txt : 20020729 0000950134-02-008780.hdr.sgml : 20020729 20020729083735 ACCESSION NUMBER: 0000950134-02-008780 CONFORMED SUBMISSION TYPE: SC 13E3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20020729 GROUP MEMBERS: D & B ACQUISTION INC GROUP MEMBERS: D & B HOLDINGS I INC GROUP MEMBERS: DAVID O CORRIVEAU GROUP MEMBERS: INVESTCORP S A GROUP MEMBERS: JAMES W CORLEY GROUP MEMBERS: WALTER S HENRION GROUP MEMBERS: WILLIAM C HAMMETT JR SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: DAVE & BUSTERS INC CENTRAL INDEX KEY: 0000943823 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 431532756 STATE OF INCORPORATION: MO FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: SC 13E3 SEC ACT: 1934 Act SEC FILE NUMBER: 005-48218 FILM NUMBER: 02712638 BUSINESS ADDRESS: STREET 1: 2481 MANANA DRIVE CITY: DALLAS STATE: TX ZIP: 75220 BUSINESS PHONE: 2143579588 MAIL ADDRESS: STREET 1: 2481 MANANA DR CITY: DALLAS STATE: TX ZIP: 75220 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: DAVE & BUSTERS INC CENTRAL INDEX KEY: 0000943823 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 431532756 STATE OF INCORPORATION: MO FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: SC 13E3 BUSINESS ADDRESS: STREET 1: 2481 MANANA DRIVE CITY: DALLAS STATE: TX ZIP: 75220 BUSINESS PHONE: 2143579588 MAIL ADDRESS: STREET 1: 2481 MANANA DR CITY: DALLAS STATE: TX ZIP: 75220 SC 13E3 1 d98543sc13e3.txt SCHEDULE 13E3 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- SCHEDULE 13E-3 Rule 13e-3 Transaction Statement under Section 13(e) of the Securities Exchange Act of 1934 ---------- DAVE & BUSTER'S, INC. (Name of Subject Company (issuer)) D&B ACQUISITION, INC. INVESTCORP S.A. D&B HOLDINGS I, INC. DAVE & BUSTER'S, INC. DAVID O. CORRIVEAU JAMES W. CORLEY WALTER S. HENRION WILLIAM C. HAMMETT, JR. (Name of Filing Person (offeror)) COMMON STOCK, PAR VALUE $0.01 PER SHARE (including associated rights) (Title of Class of Securities) 23833N104 (CUSIP Number of Class of Securities) SIMON MOORE PRESIDENT D&B ACQUISITION SUB, INC. C/O GIBSON, DUNN & CRUTCHER LLP 200 PARK AVENUE NEW YORK, NY 10166 (212) 351-4000 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of the Person(s) Filing Statement) COPY TO: E. MICHAEL GREANEY, ESQ. SEAN P. GRIFFITHS, ESQ. GIBSON, DUNN & CRUTCHER LLP 200 PARK AVENUE NEW YORK, NY 10166 (212) 351-4000 ---------- This statement is filed in connection with (check the appropriate box): a. [X] The filing of solicitation materials or an information statement subject to Regulation 14A (sections 240.14a-1 through 240.14b-2), Regulation 14C (sections 240.14c-1 through 240.14c-101) or Rule 13e-3(c) (section 240.13e-3(c)) under the Securities Exchange Act of 1934 (the "Act"). b. [ ] The filing of a registration statement under the Securities Act of 1933. c. [ ] A tender offer. d. [ ] None of the above. Check the following box if the soliciting materials or information statement referred to in checking box (a) are preliminary copies: [X] Check the following box if the filing is a final amendment reporting the results of the transaction: [ ] CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE ---------------------- -------------------- $ 216,548,579 $ 19,922.47
* Estimated for purposes of calculating the amount of the filing fee only, based upon the sum of (a) the product of the 12,223,234 shares of common stock to be acquired for cash and the merger consideration of $13.50 per share, (b) the cumulative total of the difference between the merger consideration of $13.50 per share and the exercise price per share of each of the 2,663,362 shares of common stock subject to outstanding options in which the exercise price per share is less than the merger consideration per share, and (c) the market value of the 1,150,515 shares to be acquired in exchange as determined in accordance with Regulation 0-11(a)(4) of the Securities Exchange Act of 1934. [X] Check box if any part of the fee is offset as provided by Section 240.0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. Amount Previously Paid: $ 13,481.02 Filing Party: D&B Acquisition Sub, Inc. Form or Registration No.: Schedule TO-T Date Filed: June 4, 2002 Amount Previously Paid: $ 6,441.45 Filing Party: Dave & Buster's, Inc. Form or Registration No.: Proxy Statement Date Filed: July 26, 2002
This Statement on Schedule 13E-3 is filed by Dave & Buster's, Inc., a Missouri Corporation ("D&B"), D&B Holdings I, Inc., a Delaware corporation ("D&B Holdings") formed at the direction of Investcorp S.A. ("Investcorp"), Investcorp, a Luxembourg corporation, D&B Acquisition Sub, Inc., a Missouri corporation ("D&B Acquisition") and wholly owned subsidiary of D&B Holdings, David O. Corriveau, James W. Corley, Walter S. Henrion, and William C. Hammett, Jr. This Schedule 13E-3 relates to the Agreement and Plan of Merger, dated May 30, 2002, as amended by the First Amendment to the Merger Agreement dated July 12, 2002 (the "Merger Agreement"), among D&B, D&B Holdings and D&B Acquisition pursuant to which D&B Acquisition will be merged (the "Merger") with and into D&B, with D&B as the surviving corporation. Under the terms and subject to the conditions of the Merger Agreement, each outstanding share of common stock, par value $0.01 per share, together with associated rights (the "Common Stock") will be converted into the right to receive $13.50 in cash without interest thereon (the "Merger Consideration"). Concurrently with the filing of this Schedule 13E-3, D&B is filing with the Securities and Exchange Commission (the "Commission") a preliminary proxy statement (the "Proxy Statement") under Regulation 14A of the Securities Exchange Act of 1934, as amended, relating to the special meeting of shareholders of D&B at which the shareholders of D&B will consider and vote upon a proposal to approve and adopt the Merger Agreement. A copy of the Proxy Statement is filed herewith as Exhibit (a)(1), and a copy of the Merger Agreement is attached thereto as Appendix A. The information in the Proxy Statement, including all appendices thereto, is expressly incorporated herein by reference in response to all items of this Schedule l3E-3. The Proxy Statement is in preliminary form and is subject to completion or amendment. Capitalized terms used but not defined in this statement shall have the meanings given to them in the Proxy Statement. ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON. See Schedule I to the Offer to Purchase ("Schedule I") filed as exhibit (a)(1) to the Schedule TO, filed by D&B Acquisition on June 4, 2002, and incorporated herein by reference, for information with respect to the identity and background of each director and executive officer of D&B, D&B Acquisition, D&B Holdings and Investcorp. None of the filing persons, nor to their best knowledge, any of the persons listed on Schedule I has during the last five years (i) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining him, her or it, as the case may be, from future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 13. FINANCIAL STATEMENTS. (a) The audited consolidated financial statements of D&B as of and for the fiscal years ended February 3, 2002, and February 4, 2001, are incorporated by reference to the Financial Statements and Supplementary Data section included as Item 8 to D&B's Annual Report on Form 10-K for the fiscal year ended February 3, 2002, filed with the Commission on April 24, 2002. The unaudited consolidated financial statements of D&B for the most recent quarter are hereby incorporated by reference to the Consolidated Financial Statements section included as Item I of Part I to D&B's Quarterly Report on Form 10-Q for the thirteen weeks ended May 5, 2002, filed with the Commission on June 14, 2002. ITEM 16. EXHIBITS. (a)(1) Preliminary Proxy Statement and form of Proxy Card under Regulation 14A, dated July 26, 2002.* (a)(2) Press release issued by D&B and D&B Acquisition on May 30, 2002.** (a)(3) Press release issued by D&B on July 15, 2002.*** (c)(1) Opinion of Houlihan Lokey Howard & Zukin dated May 30, 2002 (included as Annex A to the Solicitation/Recommendation Statement on Form 14D-9 filed with the Commission by D&B on June 4, 2002).**** (c)(2) Opinion of Houlihan Lokey Howard & Zukin dated July 12, 2002 (included as Appendix B to the Proxy Statement incorporated herein by reference at Exhibit (a)(1)). 2 (d)(1) Merger Agreement, dated as of May 30, 2002, among D&B Holdings, D&B Acquisition and D&B, as amended on July 12, 2002 (included as Appendix A to the Proxy Statement incorporated herein by reference at Exhibit (a)(1)). (d)(2) Support and Exchange Agreement, dated as of May 30, 2002, by and among D&B Holdings, D&B Acquisition, and each of the parties listed on Exhibit A thereto.***** (d)(3) First Amendment to the Support and Exchange Agreement, dated as of July 12, 2002. (d)(4) Form of Stockholders' Agreement to be entered into by and among D&B Holdings, D&B Acquisition, David O. Corriveau, James W. Corley, Walter S. Henrion, William C. Hammett, Jr., and the stockholders of D&B Holdings listed on Exhibit A thereto (included as Exhibit D to the Support and Exchange Agreement filed herewith at Exhibit (d)(2)). (d)(5) Guarantee of Investcorp Bank E.C., dated May 30, 2002.***** (d)(6) Confidentiality Agreement, dated March 26, 2002, by and between Investcorp International Inc. and D&B.***** (d)(7) Term Sheet for Proposed Management Equity Arrangements. (f)(1) Section 351.455 of the General and Business Corporation Law of the State of Missouri (included as Appendix C to the Proxy Statement incorporated herein by reference as Exhibit (a)(1)). - ---------- * Incorporated by reference to the Proxy Statement filed with the Commission by D&B on July 26, 2002. ** Incorporated by reference to the Schedule TO-C filed with the Commission by D&B Acquisition on May 31, 2002. *** Incorporated by reference to the Current Report on Form 8-K filed with the Commission by D&B on July 16, 2002. **** Incorporated by reference to the Solicitation/Recommendation Statement on Form 14D-9 filed with the Commission by D&B on June 4, 2002. ***** Incorporated by reference to the Schedule TO-T filed with the Commission by D&B Acquisition on June 4, 2002. 3 After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: July 26, 2002 D&B ACQUISITION SUB, INC. By: /s/ Simon Moore --------------------------------- Name: Simon Moore Title: President D&B HOLDINGS I, INC. By: /s/ Simon Moore --------------------------------- Name: Simon Moore Title: President INVESTCORP, S.A. By: /s/ Gary Long --------------------------------- Name: Gary Long Title: Authorized Executive DAVE & BUSTER'S, INC. By: /s/ David O. Corriveau --------------------------------- Name: David O. Corriveau Title: President /s/ David O. Corriveau ------------------------------------- David O. Corriveau /s/ James W. Corley ------------------------------------- James W. Corley /s/ Walter S. Henrion ------------------------------------- Walter S. Henrion 4 /s/ William C. Hammett, Jr. ------------------------------------- William C. Hammett, Jr. 5 EXHIBIT (d)(3) FIRST AMENDMENT TO THE SUPPORT AND EXCHANGE AGREEMENT This FIRST AMENDMENT TO THE SUPPORT AND EXCHANGE AGREEMENT (this "Amendment"), dated as of July 12, 2002, is entered into by and among D&B Holdings I, Inc., a Delaware corporation ("Parent"), D&B Acquisition Sub, Inc., a Missouri corporation and wholly-owned subsidiary of Parent ("Purchaser") David O. Corriveau, Fifteen, L.P., James W. Corley, Wentworth Investments, L.P., William C. Hammett, Jr. and Walter S. Henrion (each in his or its own capacity a "Stockholder," and, collectively, the "Stockholders"). A. Parent, Purchaser and the Stockholders entered into a Support and Exchange Agreement, dated as of May 30, 2002 (the "Agreement"). B. In accordance with Section 6.13 of the Agreement, Parent, Purchaser and the Stockholders desire to enter into this Amendment to amend the terms of the Agreement as provided herein. NOW, THEREFORE, in consideration of the foregoing premises and of the mutual covenants contained herein, Parent, Purchaser and the Stockholders agree as follows: 1. The second sentence of Section 2.1 is deleted in its entirety and replaced with the following: Each Stockholder shall, immediately prior to the Effective Time, (i) exchange such Stockholder's Owned Shares for newly-issued shares of capital stock of Parent and (ii) exchange such Stockholder's Rollover Options for new stock options, in each case consistent with the Parent Equity Schedule (the "Exchange"); provided that the cash equity contributions of the "Investcorp Holders" as reflected in such Exhibit B shall be made prior to or concurrently with such Exchange. 2. The table entitled "Equity Capitalization" attached as Exhibit B (Parent Equity Schedule) of the Agreement is deleted in its entirety and replaced with Exhibit A attached hereto. 3. Except as specifically modified by this Amendment, all terms and conditions of the Agreement shall remain in full force and effect without modification. (remainder of page intentionally left blank) IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date and year first written above. D&B HOLDINGS, INC. By: /s/ ------------------------------------- Name: Simon Moore Title: President D&B ACQUISITION SUB, INC. By: /s/ ------------------------------------- Name: Simon Moore Title: President /s/ ----------------------------------------- David O. Corriveau /s/ ----------------------------------------- James W. Corley /s/ ----------------------------------------- William C. Hammett, Jr. /s/ ----------------------------------------- Walter S. Henrion FIFTEEN, L.P. By: /s/ ------------------------------------- Name: David O. Corriveau Title: General Partner WENTWORTH INVESTMENTS, L.P. By: /s/ ------------------------------------- Name: James W. Corley Title: General Partner EXHIBIT A to EXHIBIT (d)(3) EQUITY CAPITALIZATION
EQUITY VALUE CALCULATION - ------------------------ Purchase Price Per Share $13.50 Equity Purchase Price $202,077,585 Repayment of Debt 87,646,115 Management Options Proceeds (668,531) Non-Management Options Proceeds (12,525,251) -------------- Total Purchase Price $276,529,918 Fees & Expenses $28,152,830 Co-CEO Loan 2,500,000 -------------- Total Uses $307,182,748 ============== Less: Senior Secured Notes + Revolver $154,761,000 -------------- Equity Value $152,421,748 ==============
CAPITAL CONTRIBUTION CALCULATION - -------------------------------- Rolling Group Existing(1) Value ---------------------------------------------------- --------------------------------- Shares In-$ Opts Rest. Stock Total pre-proceeds post-proceeds --------------- ----------- ----------- --------- ------------------ ------------- Dave Corriveau 422,717 4,988 60,000 487,705 $6,584,011 $6,547,741 Buster Corley 427,718 0 60,000 487,718 6,584,193 6,584,193 Walt Henrion 63,110 30,000 0 93,110 1,256,985 1,016,985 WC Hammett 0 60,816 25,000 85,816 1,158,511 766,250 --------------- ----------- ----------- --------- ----------------- ----------- Total 913,545 95,803 145,000 1,154,348 $15,583,700 $14,915,169 Investcorp 0 0 0 0 0 $137,506,579 TOTAL 913,545 95,803 145,000 1,154,348 $15,583,700 $152,421,748 ============
- ---------- (1) Source: Company data.
BUSINESS DEAL Performance / Deal Based Options / Restricted Stock - ------------- --------------------------------------------------------- Management Founders' Restricted Rolling Group Value at Close % Contribution Options Options Stock Total ------------------- ---------------- ----------- --------- ------------------ ------------ Dave Corriveau $6,547,741 4.30% 1.01% 1.01% 1.21% 3.22% Buster Corley 6,584,193 4.32% 1.01% 1.01% 1.21% 3.22% Walt Henrion 1,016,985 0.67% 0.40% 0.40% WC Hammett 766,250 0.50% 0.00% ------------------- ---------------- + ----------- --------- ------------------ ------------ = Total $14,915,169 9.79% 2.41% 2.01% 2.41% 6.84% Other Management $0 0.00% 5.63% 5.63% Investcorp $137,506,579 90.21% TOTAL $152,421,748 100.00% 8.05% 2.01% 2.41% 12.47%
IMPLEMENTATION - -------------- Value at Close Holdings Shares ---------------------------------------------------------------- ----------------------------------- Rolling Group Common Restricted Total Common Restricted total ------------------- ---------------- ---------------- ----------- ----------- --------- Dave Corriveau $5,706,680 $810,000 $6,516,680 37,594 5,336 42,930 Buster Corley 5,774,193 810,000 6,584,193 38,039 5,336 43,375 Walt Henrion 851,985 0 851,985 5,613 0 5,613 WC Hammett 0 337,500 337,500 0 2,223 2,223 ------------------ --------------- --------------- ---------- ---------- -------- Total $12,332,858 $1,957,500 $14,290,358 81,246 12,896 94,141 Other Management $0 $0 $0 0 0 0 Investcorp $137,506,579 $0 $137,506,579 905,859 0 905,859 TOTAL $149,839,437 $1,957,500 $151,796,937 987,104 12,896 1,000,000 Rolled Options Dilution ----------------------------------- -------- New Options & Mgmt Founders' Rolling Group Price/Share Value(1) Options(2) Strike % Rest. Stock Options(3) Options(3) ------------------ ------------ ---------- -------- -------- ------------ ---------- --------- Dave Corriveau $ 151.796937 $67,332 444 $ 81.77 3.22% 37,085 11,589 11,589 Buster Corley 151.796937 0 0 0.00 3.22% 37,085 11,589 11,589 Walt Henrion 151.796937 405,000 2,668 89.95 0.40% 4,636 4,636 0 WC Hammett 151.796937 821,011 5,409 72.53 0.00% 0 0 0 ----------- -------- ------ -------- --------- ------- Total 151.796937 $1,293,342 8,520 78.46 6.84% 78,805 27,813 23,178 Other Management 151.796937 $0 0 0.00 5.63% 64,898 64,898 0 Investcorp 151.796937 $0 0 0.00 0.00% 0 0 0 TOTAL 151.796937 $1,293,342 8,520 $ 78.46 12.47% 143,703 92,711 23,178 Restricted Rolling Group Stock Total Ownership ---------- ---------- ---------- Dave Corriveau 13,907 80,458 6.98% Buster Corley 13,907 80,460 6.98% Walt Henrion 0 12,916 1.12% WC Hammett 0 7,632 0.66% -------- -------- ------ Total 27,813 181,466 15.75% Other Management 0 64,898 5.63% Investcorp 0 905,859 78.62% TOTAL 27,813 1,152,223 100.00%
- ---------- (1) Equivalent equity under option. (2) Equity under option / deal price per share. (3) Strike at III buy-in price. EXHIBIT (d)(7) MANAGEMENT ARRANGEMENTS Note: To the extent any provisions herein (as applied to Corriveau, Corley, Henrion or Hammett) are inconsistent with those set forth in the Stockholder Agreement, the terms of the Stockholder Agreement shall govern. NEW STOCK OPTIONS Number: An aggregate of 8.05% of fully diluted common stock of D&B Holdings I, Inc. ("Holdings"), of which an aggregate of 2.41% will be granted to Messrs. Corriveau, Corley and Henrion, 2.01% will be reserved for future grants and the balance (3.62%) will be granted at or promptly after closing to members of management other than Messrs. Corriveau, Corley and Henrion. Exercise Price: Per share price paid by Investcorp for shares of Dave & Buster's, Inc. (the " Company") in the proposed equity tender offer ("Cost"). Term: 7 years and 30 days. 1 Vesting: (a) Up to 20% per year (the "Annual Portion") for 5 years, based upon achievement of the EBITDA performance targets in five-year projections prepared by Management (the "Management Plan") attached as Schedule A. If the Company's EBITDA performance equals or exceeds 85% of a target in a given year but is less than 100% of the target, one-half of the Annual Portion for that year, plus an additional percentage of the Annual Portion determined on a straight-line basis from 85% to 100% of achievement of such EBITDA target, will vest. Options that do not vest in any year may vest in any subsequent year within such five-year period based upon cumulative results. (b) Upon an Initial Public Offering ("IPO"), options that are unvested as of the IPO closing date shall thereafter vest in three installments on the first, second and third anniversaries of the closing of the IPO (without regard to any performance targets). (c) Upon a sale of the Company prior to an IPO (i) 50% of the unvested options will vest if, in connection with such sale, Investcorp realizes a 15% annual internal rate of return ("IRR") on a fully-diluted basis and (ii) an additional 5% of the unvested options will vest for each additional 1% IRR realized by Investcorp in connection with such sale. (d) Any options remaining unvested will vest 7 years from closing (without regard to any performance targets). Effect of Termination Unvested options expire immediately upon of Employment: termination of employment for any reason, except if employment is terminated by the Company without cause, by the employee for good reason or by reason of employee's death or disability, in which case a pro rata portion (equal to the ratio the number of days elapsed in such year prior to termination bears to 365) of the Annual Portion for such year will vest at the end of such year if the performance targets for such year are met. Vested options expire per Schedule B. "FOUNDER" STOCK OPTIONS Number: 2.01% (in the aggregate) of fully diluted common stock of Holdings to be granted to Messrs. Corriveau and Corley. Exercise Price: Cost. Term: 7 years and 30 days. 2 Vesting: (a) Upon a sale of the Company (i) up to 50% of the unvested options will vest if, in connection with such sale, Investcorp realizes a 15% annual IRR on a fully-diluted basis and (ii) an additional 10% of the unvested options will vest for each additional 1% IRR realized by Investcorp in connection with such sale. (b) Any options remaining unvested will vest 7 years from closing. Effect of Termination Unvested options expire immediately upon of Employment: termination of employment for any reason. Vested options expire per Schedule B. NEW RESTRICTED STOCK Number: 2.41% (in the aggregate) of fully diluted common stock of Holdings to be granted to Messrs. Corriveau and Corley. Lapse of Restrictions: (a) Up to 20% per year for 5 years, based upon achievement of the EBITDA performance targets in the Management Plan. If the Company's EBITDA performance equals or exceeds 85% of a target in a given year but is less than 100% of the target, one-half of the Annual Portion for that year, plus an additional percentage of the Annual Portion determined on a straight-line basis from 85% to 100% of achievement of such EBITDA target, will become unrestricted. Shares for which restrictions do not lapse in any year may become unrestricted in any subsequent year within such five-year period based upon cumulative results. (b) Upon an IPO, shares that remain restricted as of the IPO closing date shall thereafter have their restrictions lapse in three installments on the first, second and third anniversaries of the closing of the IPO. (c) Upon a sale of the Company prior to an IPO (i) up to 50% of the restricted shares will become unrestricted if, in connection with such sale, Investcorp realizes a 15% annual IRR on a fully-diluted basis and (ii) an additional 5% of the restricted shares will become unrestricted for each additional 1% IRR realized by Investcorp in connection with such sale. (d) Any shares remaining restricted will vest 7 years from closing (without regard to any performance targets). 3 Effect of Termination Shares remaining subject to restrictions of Employment: will be cancelled immediately upon termination of employment for any reason, except if employment is terminated by the Company without cause, by the employee for good reason or by reason of employee's death or disability, in which case a pro rata portion (equal to the ratio the number of days elapsed in such year prior to termination bears to 365) of the Annual Portion for such year will become unrestricted at the end of such year if the performance targets for such year are met. PUTS/CALLS Applicability: Applies to restricted shares and option shares. Call: Company may call shares upon any termination of employment prior to an IPO per Schedule C. Put: If the call is unexercised, under certain circumstances the Executive may require the Company to repurchase the shares per Schedule C. FMV: Fair market value of the shares determined annually in good faith by the Company's board of directors. OTHER PROVISIONS Withholding: Exercise price and tax withholding obligations may be satisfied by having option shares withheld. Tag/Drag Rights: The restricted shares and option shares will have the right to participate pro rata in a sale of the Company and Investcorp will have the right to require such participation. These tag/drag rights expire upon an IPO. Restrictions on Prior to an IPO, restricted shares and Transfer: option shares will be subject to restrictions on transfer with flexibility for estate planning purposes. IPO and Secondary Management holders of restricted shares, Offerings: options and option shares will be subject to customary underwriter lock-up arrangements for the IPO and secondary offerings. Generally, participation by senior management in the IPO is not available. EBITDA Performance All compensation payable as a result of Targets: meeting targets counted as an expense for determining whether and to what extent EBITDA targets have been met for the applicable performance period (as per GAAP). 4 Existing Executive Messrs. Corriveau, Corley and Hammett have Retention Agreements: agreed that the foregoing Management Arrangements shall supercede all rights under their respective Executive Retention Agreements which will be terminated effective at closing. Participation in the foregoing Management Arrangements by any other employee of the Company who has an Executive Retention Agreement shall be conditioned on similar termination of such employee's rights thereunder. Noncompete Messrs. Corriveau and Corley will each enter into 2 year noncompete agreements at the closing substantially in the form previously delivered by Investcorp. 5 SCHEDULE A EBITDA TARGETS (FISCAL YEARS)
($ in millions) 2002 2003 2004 2005 2006 -------- -------- -------- -------- -------- EBITDA $ 54.8 $ 61.7 $ 68.3 $ 77.7 $ 89.6
6 SCHEDULE B
TERMINATION EVENT UNVESTED OPTIONS TERMINATE VESTED OPTIONS TERMINATE Executive terminated by Company for Immediately 30 days after terminating event(1) Cause Executive quits without Good Reason Immediately 90 days after terminating event(1) Executive quits with Good Reason Immediately(2) 180 days after terminating event(1) Executive terminated by the Company Immediately(2) 180 days after terminating event(1) without Cause Death or disability Immediately(2) One year after terminating event(1)
(1) Subject to (2) below, the options are exercisable only to the extent vested on the day of the terminating event. (2) A pro rata portion (equal to the ratio the number of days elapsed in such year prior to termination bears to 365) of the Annual Portion for such year will vest at the end of such year if the targets for such year are met. 7 SCHEDULE C
CALL PROVISION CALL PRICE ----------------------------------------------------------------------------- IF WITHIN 3 YEARS FROM GRANT DATE IF AFTER 3 YEARS FROM GRANT DATE Employee terminated without Cause FMV FMV Employee leaves with Good Reason FMV FMV Employee leaves without Good Reason Lower of Cost or FMV(1) FMV Employee is terminated for Cause Lower of Cost or FMV(1) Lower of Cost or FMV Death, disability, retirement FMV FMV
PUT PROVISION PUT PRICE ----------------------------------------------------------------------------- IF WITHIN 3 YEARS AFTER GRANT DATE (2 IF AFTER 3 YEARS FROM GRANT DATE (2 YEARS IN THE CASE OF TERMINATION YEARS IN THE CASE OF TERMINATION WITHOUT CAUSE) WITHOUT CAUSE) Employee terminated without Cause Lower of Cost or FMV(1) FMV Employee leaves with Good Reason FMV FMV Employee leaves without Good Reason No put FMV Employee is terminated for Cause No put No put Death, disability, retirement FMV FMV
(1) Within the 1st year, it will be at Cost 8 MANAGEMENT ARRANGEMENTS (ROLLOVER EQUITY) ROLLOVER RESTRICTED STOCK Number: Existing shares of restricted stock held by: David Corriveau James Corley Walter Henrion W.C. Hammett Lapse of Restrictions: The restrictions shall be as contained in the existing restricted stock agreements governing such shares. [Under Review] Effect of Termination of The effect of termination shall be as described in the existing restricted Employment: stock agreements governing such shares.
ROLLOVER OPTIONS Number: Existing options held by: Walter Henrion W.C. Hammett (net of $100,000 gross proceeds) Exercise Price: A discount from the per share price paid by Investcorp for shares of the Company in the proposed equity tender offer which will preserve, in the aggregate, the in-the-money value to the holder of the options being rolled over. Term: Remaining life of such options under the existing option agreements governing such options. Vesting: Fully vested. Effect of Termination of Expire per Schedule B attached to the term sheet for the new equity Employment: arrangements.
OTHER PROVISIONS Stockholder The rollover equity described above will be subject to Agreement the terms of the Stockholder Agreement. New Equity The new equity to be issued or reserved for issuance (new stock options, new restricted stock and "Founder" stock options) will dilute the rollover equity and the cash equity pro rata.
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